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UK sugar tax provokes a sour reaction from drinks brands

The UK soft drinks industry was yesterday delivered a huge blow as the government announced a tax on sugary drinks. Mintel research reveals that consumers aren’t much keener on the idea of a sugar tax than the soft drinks industry…

The “sugar tax” debate has rumbled on for years, yet – shrouded in controversy – this levy has never seemed likely to go ahead – until now. Taking Brits by surprise, George Osborne’s announcement that sugar-laden drinks will be taxed has been the main talking point of the 2016 Budget. The turning point came as the WHO called for taxation on sugary drinks in a major report on childhood obesity unveiled in January 2016. Celebrity chef-come health campaigner Jamie Oliver, while being a lesser force in global public health, has also been a vociferous supporter of this move.

The tax will be imposed according to the volume of sugar-sweetened drinks companies produce/import, withan expected 18p and 24p levied per litre depending on the sugar content. While far from a huge price hike for shoppers, this will be no small change for the government; £530 million is anticipated to be amassed from the tax which – in line with the strong focus on reducing childhood obesity – will be spent on primary school sports in England.

For the UK, this is the most prolific government-led assault to occur during the high-profile war on sugar. Mintel consumer research shows that this ingredient has become public enemy number one, overtaking fat for the first time in years, as a direct impact of the sustained media scrutiny in 2014 and 2015. Within this, carbonated soft drinks are often shown as the main villains.

This rather pantomime-esque portrayal of fizzy drinks is something industry associations have picked up on within their all-round slamming of the tax, branding it a “piece of political theatre”. Both Coca-Cola and A.G. Barr have questioned why fizzy drinks have been “unfairly singled out” and point to the efforts they have made in reducing calories. The share prices of leading soft drink manufacturers like Coca-Cola, PepsiCo and Britvic plummeted in an immediate response to the news.

Companies have merrily been “doing their bit” under the voluntary – and rather wishy-washy – Responsibility Deal. This approach, lacking any financial incentive, has been far too easy to ignore. Despite many companies’ undeniable progress, overall there has been no notable increase in the share of new carbonated soft drink (CSD) launches featuring a low/no/reduced sugar claim over the last five years as recorded by Mintel’s Global New Products Database (GNPD). Shockingly, this proportion dropped by 25 year-on-year to account for just 23% of new products entering the market in 2015. The taxation should provide genuine impetus to low-sugar innovation.

True to the controversial nature of this levy, reactions among the general public will also be very mixed. While Jamie Oliver gained public support with 150,000 people backing a tax in an e-petition, opposition is likely to outweigh support. Exclusive Mintel research indicates that half of adults are against initiatives involving taxing unhealthy food, compared to over a third who are in favour of these initiatives. This “stick over carrot” approach, and shift towards “supernanny” state politics, doesn’t sit well with many people. Doubts over the potential effectiveness of the tax are also widespread, with lower-income households once more perhaps being the ultimate losers if costs are passed on to consumers.

Steeper prices may not be enough of a deterrent for fans of sugary fizzy drinks. It is the powerful message this sends both to consumers and to the industry – in terms of making a real, decisive stand on sugar – which should provide the lasting legacy.

Emma Clifford is Senior Food Analyst at Mintel and is responsible for researching and writing food reports. Before joining Mintel in 2011, Emma worked as a marketing information analyst at Marketforce and she gained retail experience from her time working as a fashion distributor for Debenhams at the company’s head office